New Home Building Helps Drive Construction Spending In December 2014

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The Federal Savings Bank informs readers of the latest construction spending report from the U.S. Department of Commerce.

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With the housing market recovery continuing, home builders anticipate greater home sales by increasing construction

The Federal Savings Bank was pleased to see the U.S. Department of Commerce announce on Monday, February 2nd that construction spending rose 0.4 percent in December 2014 from the previous month, with residential construction boosting spending. Overall, the seasonally adjusted annual rate for construction spending reached $982.1 billion. Private construction represented the majority of this figure with $698.2 billion. Construction spending could increase this year after the housing market sees a higher supply of homes as builders respond to more demand for new single-family homes.

The growth in the residential construction segment helped to increase overall spending in December, with a 1.2 percent increase in single-family home construction spending compared to November. In addition to a month-over-month increase, the latest figures showed an 11 percent gain from December 2013.

With the housing market recovery continuing, home builders anticipate greater home sales by increasing construction; The Federal Savings Bank also expects a strong year given a higher number of mortgage applications versus winter 2014. The Commerce Department said builders listed 218,000 homes that were in the process of being built or finished in December.

"We are in a strong competitive position for the upcoming spring sales season with a well-stocked supply of land, lots and homes," said David Auld, president and CEO of D.R. Horton, during a Jan. 26 conference call with investors, as reported by the Wall Street Journal on January 27th.

Usually, existing homeowners purchase new homes. Thus, a larger number of new homes built will give homeowners the opportunity to trade up from their existing homes and list their property for sale to give more first-time home buyers a chance for purchase. A larger number of existing homes listed for sale will give first-time home buyers greater opportunity to purchase a property at an affordable price. Currently national real estate inventories are low which is propping up home prices caused by multiple bids on the limited amount of housing supply.

Contact the Federal Savings Bank, a veteran owned bank, to learn more about mortgages.

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Giorgio Urbano Ferrero
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